Start-Up Nation

How seven million people surrounded by enemies created innovation magic.

The premise for Start-Up Nation: The Story of Israel's Economic Miracle, by Dan Senor and Saul Singer, is simple. How has a nation of just seven million people, only a little more than 60 years old, surrounded by enemies and with no natural resources, produced more start-up companies and produced more Nasdaq-quoted companies than Europe, Japan, China, India and Korea combined? What magic dust does Israel possess to foster this entrepreneurial spirit?

This book tries to answer that question, while also examining the potential threats to Israel’s future wellbeing. It has a lively opening with case studies of innovation from recent years including one about a young Israeli who has developed a car battery that could make electric vehicles financially viable.

Instead of plugging in the car for hours on end to charge up, you would simply pull in to a battery swap station and go through a machine resembling a car wash. Your battery is dropped out and replaced by a newly charged one.

You pay your fee as you would for petrol and then carry on your journey. And it shouldn’t take more than a couple of minutes. Simple.

The idea was developed by Shai Agassi, who set up a company called Better Place to develop the technology. He was helped along the way by Israel’s commitment to eliminate its dependency on motor vehicles powered by oil, which is largely controlled by its Arab neighbours.

After a few false starts, Agassi raised $200 million for the venture, making it the fifth biggest start-up in history. It was supported by Renault and Nissan and Israeli billionaire Idan Ofer and is now being trialled in places like Denmark, Canada and Hawaii.

When it was founded in 1948 as a homeland for the Jews, Israel was a geographically small and arid territory.

To survive, it had to become self sufficient in so many different ways. In the early years, that meant devising innovative irrigation systems to nourish the desert soil and allow for agricultural use and to counter food rationing.

The constant influx of Jews from around the world has also played a key part in the country’s growth, bringing in new skills and ideas and swelling the domestic market for goods, which was important in the context of an Arab boycott.

The Israeli military also lies at the heart of much of the innovation, with many ex-soldiers heading up leading tech companies.

Young people are thrust into frontline positions, making potentially life and death decisions in a split second. You grow up quickly in that type of environment.

Conscription means that every young adult serves in the Israeli Defense Force (IDF), with the smartest students cherry-picked for the elite wings of the military. Israel is on a constant state of alert and these young people are often thrust into frontline positions, making potentially life and death decisions in a split second. You grow up quickly in that type of environment.

The authors argue that Israel benefits from having stable institutions and rule of law that exist in advanced democracies while also having a non-hierarchical culture, where everyone in business belongs to overlapping networks produced by small communities, common army service, geographic proximity and informality.

And the Israeli military has also sought constantly to innovate; to stay one step ahead of its enemies in terms of technology, hardware and intelligence. The Israeli government commits significant funds to research and development for the IDF.

But why has Israel been more successful than Korea, which also has a draft and a significant external threat?

Korea is home to a large number of tech companies but Israel has a far higher percentage of start-ups. “The fear of losing face and the bursting of the internet bubble,” holds Korea back, says Laurent Haug, creator of the Lift conferences, which focus on the “nexus of technology and culture” and alternate each year between Switzerland and Korea.

“In Korea, one should not be exposed while failing.”

Israelis, meanwhile, “don’t care about the social price of failure”.

But what of the future? Israel blossomed in the 1990s through the boom in technology, a massive wave of immigration from the former Soviet Union and the 1993 Oslo Peace Accords.

But immigration has slowed to a trickle while the peace that existed was shattered by a wave of suicide bombings and the standoff in Gaza, which has hit the tourist industry.

With global venture capital funding drying up, “thousands of workers in the tech scene” have been laid off. There are also concerns that Israel’s lead in academia is slipping, with large numbers of professors moving abroad.

And the threat of Iran also hangs over the region. “The first-stage Iranian goal is to terrify Israel’s most talented citizens into leaving,” is the bleak assessment from prime minister Binyamin Netanyahu.

The quality of life is also deemed to be lower than the West with Israel enacting a 10-year tax holiday on foreign income to try and entice people to return to the country to live.

The book concludes with a synopsis of a long meeting between the authors – both American Jews – and ex-PM Shimon Peres, also a former Nobel Prize winner. His advice is to forget the “old industries.” Pick five new ones and go for them hammer and tongs. Be a world leader. It sounds like good advice.

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Visitor Comments: 8

(7)
Anonymous,
July 27, 2010 4:03 PM

Invest in Israel

If you're so passionate about Israel, why don't you invest in Israel? Buy Israeli stocks or funds. You can do it all online and contribute.

(6)
Ben Powers,
July 26, 2010 6:42 PM

Nice, but misses the point

The authors of the book and the article, though well meaning, have missed the point. Any honest observer must admit that human effort alone is insufficient to explain the success of the Jewish State, especially considering the challenges she has faced. Only Hashem's help and guidance has brought Israel to where it is now. The sooner we as a society are able to talk openly about it, the better off the whole world will be.

(5)
Leon Stern,
July 26, 2010 5:32 PM

Divine assistance

Maybe Israelis are no smarter than anyone else. Maybe they have the benefit of Divine assistance?

Corin,
February 11, 2012 4:52 AM

Maybe a bit of both?

The Torah was crafted by G-d to be a guide to righteous living and to finding Him. It also serves the purpose of being a wonderful source for education, in order to be a good Jew you must learn the Tanakh and Talmud. This translates into secular studies as well and as a result Jews have the highest collective IQ out of any people in the world. Obviously if G-d didn't intend it then it wouldn't happen, and G-d has obviously blessed the Jews with gifts as he promised (and w/ curses for their disobedience, as he also promised). Either way, G-d gives the Jews more attention and guidance than the other nations and we should be proud to be his representatives in the world and try to be worthy of the honor as best we can. Israel is just more evidence for Hashem's greatness, but one need only look at nature to see how wonderful the Lord is.

(4)
Anonymous,
July 26, 2010 11:22 AM

I include Start Up Nation when I speak in US and Israel

I have included Start Up Nation stories and ideas over the last four months, when I have spoken in US and Israel. I add something of my own historical facts plus the main theme that Rabbi Meir Kahane calls the three letter word. Start Up Nation is superb PR for Israel and I add to it that G-d gave this Land to the Jews and guaranteed Jews survival. I add to it that Rabbi Avigdor Miller calls us a Torah Nation and that is our signature. I add to it my ideas to develop Israel with entertainment that is full of morality and not fantasy. And can come up with employment for another one million Jews now. Contact me. Close you eyes and picture 8 million Jews returning this week to Israel. I add to it alot of prayer and hope, thank the three letter word G o d.

(3)
Brian Rosenzweig,
July 26, 2010 7:21 AM

Americans go to invest in Israel after this book

Take a look at this article from YNET -- shows what type of operations are out there to get Americans more vested in the Israeli start-up market: http://www.ynetnews.com/articles/0,7340,L-3913022,00.html

(2)
Baruch,
July 26, 2010 6:20 AM

When I lived in America, we spoke of being proud that America was clearly blessed and of our strong Protestant work ethic. Why do these authors have a problem saying similar things? They seem to have correctly assessed every reason for Israel's successes except for two of the best-known-in-the-world, core sources: Israel is blessed and everyone knows that Judaism, Torah and Jews have the strongest of all learning ethics, so central to success in technological endeavors.

(1)
Marilyn Shecter,
July 25, 2010 11:50 PM

Perfect timing! I just finished reading this today. It is a great book and I recommend it highly. It provides a wonderful look into the many reasons behind Israel's many success stories.

Since honey is produced by bees, and bees are not a kosher species, how can honey be kosher?

The Aish Rabbi Replies:

The Talmud (Bechoros 7b) asks your very question! The Talmud bases this question on the principle that “whatever comes from a non-kosher species is non-kosher, and that which comes from something kosher is kosher.”

So why is bee-honey kosher? Because even though bees bring the nectar into their bodies, the resultant honey is not a 'product' of their bodies. It is stored and broken down in their bodies, but not produced there. (see Shulchan Aruch Y.D. 81:8)

By the way, the Torah (in several places such as Exodus 13:5) praises the Land of Israel as "flowing with milk and honey." But it may surprise you to know that the honey mentioned in the verse is actually referring to date and fig honey (see Rashi there)!

In 1809, a group of 70 disciples of the great Lithuanian sage the Vilna Gaon, arrived in Israel, after traveling via Turkey by horse and wagon. The Vilna Gaon set out for the Holy Land in 1783, but for unknown reasons did not attain his goal. However he inspired his disciples to make the move, and they became pioneers of modern settlement in Israel. (A large contingent of chassidic Jews arrived in Tzfat around the same time.) The leader of the 1809 group, Rabbi Israel of Shklov, settled in Tzfat, and six years later moved to Jerusalem where he founded the modern Ashkenazic community. The early years were fraught with Arab attacks, earthquakes, and a cholera epidemic. Rabbi Israel authored, Pe'at Hashulchan, a digest of the Jewish agricultural laws relating to the Land of Israel. (He had to rewrite the book after the first manuscript was destroyed in a fire.) The location of his grave remained unknown until it was discovered in Tiberias, 125 years after his death. Today, the descendants of that original group are amongst the most prominent families in Jerusalem.

When you experience joy, you feel good because your magnificent brain produces hormones called endorphins. These self-produced chemicals give you happy and joyful feelings.

Research on these biochemicals has proven that the brain-produced hormones enter your blood stream even if you just act joyful, not only when you really are happy. Although the joyful experience is totally imaginary and you know that it didn’t actually happen, when you speak and act as if that imaginary experience did happen, you get a dose of endorphins.

These chemicals are naturally produced by your brain. They are totally free and entirely healthy.

Many people find that this knowledge inspires them to create more joyful moments. It’s not just an abstract idea, but a physical reality.

Occasionally, when I walk into an office, the receptionist greets me rudely. Granted, I came to see someone else, and a receptionist's disposition is immaterial to me. Yet, an unpleasant reception may cast a pall.

A smile costs nothing. Greeting someone with a smile even when one does not feel like smiling is not duplicity. It is simply providing a pleasant atmosphere, such as we might do with flowers or attractive pictures.

As a rule, "How are you?" is not a question to which we expect an answer. However, when someone with whom I have some kind of relationship poses this question, I may respond, "Not all that great. Would you like to listen?" We may then spend a few minutes, in which I unburden myself and invariably begin to feel better. This favor is usually reciprocated, and we are both thus beneficiaries of free psychotherapy.

This, too, complies with the Talmudic requirement to greet a person in a pleasant manner. An exchange of feelings that can alleviate someone's emotional stress is even more pleasant than an exchange of smiles.

It takes so little effort to be a real mentsch.

Today I shall...

try to greet everyone in a pleasant manner, and where appropriate offer a listening ear.

With stories and insights,
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